2023 (10) TMI 1455 - AT - IBC

SBI loses appeal as NCLAT rules rejoinders under Rules 41-42 cannot add new grounds missing from original petition

State Bank of India Versus India Power Corporation Limited and India Power Corporation Limited Versus State Bank of India

The NCLAT dismissed an appeal by State Bank of India regarding an application to take on record a rejoinder. The tribunal held that a petitioner cannot ... Application to take on record the rejoinder filed by it to the counter filed by the Corporate Debtor - additional factual assertions not pleaded in the main petition - HELD THAT:- When the Appellant/Petitioner sets up a case in the application filed either under Section 7, 9 or 10 of the Code then as per Rule 41 of the Rules, the Respondent shall specifically admit, deny or rebut the facts stated by the Applicant in his petition or application and state such additional facts as may be found necessary in his reply whereas it is provided in Rule 42 of the Rules that where the respondent states such additional facts as may be necessary for the just decision of the case, the Bench may allow the petitioner to file a rejoinder to the reply pertaining to those additional facts but it cannot set up a new case altogether which has not been set up by the Applicant in the main application as it would again require a reply by the Respondent and further rejoinder by the Applicant and the process will go and shall never come to end. In any case, the petitioner cannot enlarge the scope of the petition by adding a new ground in the rejoinder, as the purpose of a rejoinder is not to fill in the gaps left by the petitioner in their pleadings. There are no merit in this appeal as well filed by State Bank of India and the same is hereby dismissed. Issues Involved:1. Whether the application to take the rejoinder on record after the closure of the opportunity is maintainable.2. Whether the Adjudicating Authority was correct in observing that additional factual assertions not pleaded in the main petition should be eschewed.Issue-wise Detailed Analysis:1. Maintainability of the Application to Take the Rejoinder on Record:The first appeal was filed by the Corporate Debtor challenging the order allowing the rejoinder filed by the Financial Creditor to be taken on record. The Corporate Debtor argued that the application to take the rejoinder on record was not maintainable after the closure of the opportunity to file it. They contended that as per Rule 55 of the NCLT Rules, no pleadings subsequent to the reply are permissible except by the leave of the Tribunal.In response, the Financial Creditor argued that the rejoinder was filed under Rule 42 of the NCLT Rules, which allows the Tribunal to grant leave for filing a rejoinder. The Adjudicating Authority had already suo motu granted leave for filing the rejoinder in its order dated 03.12.2021.The Tribunal referred to various provisions of the NCLT Rules, including Rule 11 (Inherent Powers), Rule 51 (Power to regulate procedure), Rule 55 (Pleadings before the Tribunal), and Rule 153 (Enlargement of time). The Tribunal found that the application was not in the nature of a review application and that the Tribunal had the jurisdiction to decide and dispose of the application on its merits. The Tribunal also noted that the Corporate Debtor did not oppose the suo motu order granting leave to file the rejoinder or the subsequent extension of time.The Tribunal concluded that the application was maintainable, and the first appeal lacked merit and was dismissed.2. Observations on Additional Factual Assertions in the Rejoinder:The second appeal was filed by the Financial Creditor challenging the observation in the impugned order that additional factual assertions not pleaded in the main petition, if introduced in the rejoinder, would not be considered and would be eschewed. The Financial Creditor argued that Rule 42 of the NCLT Rules allows the petitioner to file a rejoinder when the respondent introduces new facts in their reply, and relied on various High Court decisions supporting this view.The Corporate Debtor countered that Rule 42 only allows for a rejoinder to address additional facts introduced by the respondent, not to introduce new facts by the petitioner. The Tribunal agreed with this interpretation, stating that the purpose of a rejoinder is to address new facts introduced by the respondent, not to set up a new case or introduce new grounds not included in the original petition.The Tribunal emphasized that allowing new grounds in the rejoinder would lead to an endless cycle of replies and rejoinders, thus defeating the purpose of the procedural rules. Therefore, the Tribunal found no merit in the second appeal and dismissed it.In conclusion, both appeals were dismissed, with the Tribunal upholding the Adjudicating Authority's decision to take the rejoinder on record while eschewing any new factual assertions not pleaded in the main petition.